Series 6 F3: Investment information, recommendations and records

1. What does an investor own by purchasing shares of an open-end mutual fund?

1. A direct deposit obligation of the selling bank
2. A fixed claim against the portfolio manager's salary
3. A voting interest in the broker's operating business
4. A proportional interest in the fund's portfolio

2. Which entity ordinarily manages the investment portfolio of an SEC-registered mutual fund?

1. An SEC-registered investment adviser
2. The federal deposit insurance agency
3. The securities exchange's listing committee
4. The shareholder's personal tax preparer

3. Which statement best describes how a traditional open-end mutual fund shareholder exits an investment?

1. Require another shareholder to buy the shares first
2. Wait until the fund's initial public offering reopens
3. Exchange the shares for the adviser's corporate stock
4. Redeem shares through the fund or an intermediary

4. An active mutual fund manager buys securities that are not in a benchmark index. What determines whether this is consistent with the fund's approach?

1. The fund's stated investment objective and strategies
2. A requirement to hold every benchmark security equally
3. A requirement to avoid all security sales during the year
4. A requirement to copy the best-performing rival fund daily

5. Under the general forward-pricing rule, what NAV is the basis for a traditional mutual fund purchase order received in good order?

1. The NAV next computed after receipt of the order
2. The most recently published NAV before the order
3. The lowest NAV computed during the previous week
4. The NAV selected by the investor after the market closes

6. A mutual fund has $84 million in assets, $4 million in liabilities and 4 million shares outstanding. What is its NAV per share?

1. $21.00
2. $20.00
3. $22.00
4. $19.00

7. A fund's assets and shares outstanding remain unchanged while its liabilities rise. What happens to NAV per share?

1. It increases
2. It decreases
3. It remains unchanged
4. It becomes the offering sales load

8. A traditional mutual fund has a $19 NAV and a 5% front-end sales charge measured as a percentage of the offering price. What is the offering price?

1. $20.00
2. $19.95
3. $18.05
4. $24.00

9. An investor puts $4,800 into a no-load mutual fund at a $24 NAV. Assuming no other purchase charges, how many shares are purchased?

1. 192 shares
2. 240 shares
3. 208 shares
4. 200 shares

10. Where should an investor look for a standardized comparison of a mutual fund's shareholder fees and annual operating expenses?

1. The transfer agent's staff directory
2. The prospectus fee table
3. The broker's securities license card
4. The exchange's opening-bell calendar

11. How are a mutual fund's recurring operating expenses generally paid?

1. Only from cash invoices sent separately to each shareholder
2. From federal deposit insurance payments to the fund
3. Only from the adviser's unrelated personal investments
4. From fund assets, reducing shareholders' investment value

12. Which cost is a mutual fund distribution fee intended to help cover?

1. Insuring the investor against portfolio losses
2. Marketing and selling the fund's shares
3. Paying principal on a shareholder's bank loan
4. Guaranteeing that the fund matches its index

13. A mutual fund reports a zero expense ratio. Which conclusion about the investor's total costs is sound?

1. Other direct or indirect costs may still apply
2. Every brokerage commission is automatically waived
3. The investor must receive the portfolio's gross return
4. All securities transaction costs are prohibited

14. An investor writes a $20,000 check for a fund with a 4% front-end load based on the purchase amount. With no other purchase fees, how much buys fund shares?

1. $20,800
2. $19,230.77
3. $20,000
4. $19,200

15. Two share classes of the same mutual fund hold the same investment portfolio. Why may their returns differ?

1. They must own unrelated portfolios
2. Their fees and expenses may differ
3. One class is automatically FDIC insured
4. Each class must use a different benchmark

16. Which charge pattern is commonly associated with Class A mutual fund shares?

1. An obligatory fixed charge on every dividend received
2. An exchange commission identical to a listed stock trade
3. A guarantee of no recurring expenses after purchase
4. A front-end load that may qualify for a discount

17. Why can Class C shares become relatively expensive for an investor who holds them for many years?

1. Their initial NAV must always exceed Class A NAV
2. Higher ongoing 12b-1 fees can accumulate over time
3. Their dividends are automatically taxed twice each year
4. Their portfolios must buy only short-term government debt

18. A retail investor is eligible for institutional shares through an advisory account. Which statement about institutional share access is accurate?

1. Only corporations can ever hold an institutional share class
2. Retail investors may gain access through certain arrangements
3. Every institutional share class has the same dollar minimum
4. Institutional shares always eliminate separate advisory fees

19. Two eligible share classes have different initial and ongoing charges. What is the most useful basis for comparing them?

1. Only the size of the first sales charge at purchase
2. Only the alphabetical order of the share-class names
3. Total expected costs over the intended holding period
4. Only the class that pays the largest selling compensation

20. A fund's stated front-end load is 5% below $50,000 and 3% at $50,000 or more. What load applies to an eligible $60,000 purchase?

1. $3,000
2. $1,500
3. $1,800
4. $2,500

21. A fund permits rights of accumulation across eligible funds in its family. What can the investor generally combine with a new purchase to reach a breakpoint?

1. Unrelated checking-account balances
2. Projected salary from future employment
3. Qualifying existing fund holdings
4. The broker's personal holdings in the fund

22. A customer expects several future Class A purchases that together could reach a breakpoint. Which arrangement may provide the discount before all purchases are completed?

1. A discretionary trading agreement
2. A market order with a stop price
3. A letter of intent
4. A beneficiary designation form

23. A customer fails to invest the amount specified in a mutual fund letter of intent. What can happen under the disclosed arrangement?

1. The fund must waive all sales charges on completed purchases
2. The broker must replace the missing investment with its own cash
3. The shares automatically become government-insured deposits
4. The fund can retroactively assess the appropriate sales charges

24. A customer has fund-family holdings in several accounts. How should breakpoint eligibility be determined?

1. Always exclude holdings outside the new account
2. Always combine every security held at every firm
3. Apply one universal breakpoint schedule to all funds
4. Check the fund's aggregation and valuation terms

25. A representative steers a customer into a $49,900 fund purchase just below a $50,000 breakpoint solely to receive a higher sales charge. Which rule addresses this conduct?

1. FINRA Rule 4514 on check authorizations
2. FINRA Rule 2090 on identifying customer facts
3. FINRA Rule 2342 on breakpoint sales
4. FINRA Rule 3260 on discretionary accounts

26. A fund has no front-end or deferred load, but sales-related and service charges against assets total 0.40% annually. May a representative call it no-load under Rule 2341?

1. Yes, because it has no front-end purchase charge
2. Yes, because all asset-based charges are disregarded
3. No, because every fund must charge a front-end load
4. No, those charges exceed the 0.25% annual limit

27. For a registered fund whose registration statement became effective in 2024, may a member sell shares if a front-end load is imposed on reinvested dividends?

1. Yes, if the investor also owns Class A shares elsewhere
2. Yes, if the reinvestment is below a stated breakpoint
3. No, the rule prohibits that dividend-reinvestment load
4. No, because dividends may never be reinvested in funds

28. Which portfolio approach is characteristic of a traditional unit investment trust?

1. Daily active trading to beat a changing benchmark
2. Holding a relatively fixed portfolio for the trust's life
3. Continuous reinvestment directed by a board of managers
4. Unlimited new portfolio selections by each unitholder

29. What happens to a traditional UIT on its specified termination date?

1. Remaining securities are sold and proceeds go to investors
2. The trust automatically becomes a perpetual bank deposit
3. Investors lose their right to receive any remaining assets
4. Every unit automatically converts into its sponsor's stock

30. Which description of a traditional UIT's units is generally accurate?

1. They are nonredeemable until a court orders liquidation
2. They guarantee repayment of the original purchase price
3. They are redeemable at approximately NAV
4. They can be sold only to another unit owner at par

31. Where can an investor review the securities selected for a traditional UIT's relatively fixed portfolio?

1. The sponsor's employee time sheet
2. The custodian's building lease
3. The exchange's holiday schedule
4. The UIT's prospectus

32. For ordinary retail investors, how are ETF shares generally bought and sold?

1. Directly with the fund at a guaranteed $1 price
2. Only in the fund's first public offering
3. In market transactions on an exchange
4. Through daily mandatory redemptions with the adviser

33. An ETF has a $50 NAV while its exchange price is $51. How is the share price described?

1. At a discount to NAV
2. At a premium to NAV
3. At its redemption par value
4. At a guaranteed liquidation value

34. Which pricing difference distinguishes an ETF from a traditional open-end mutual fund for retail investors?

1. ETF shares must always trade at the prior day's NAV
2. ETF market prices fluctuate during the trading day
3. Mutual fund shares trade continuously on exchanges
4. Mutual fund shares have no underlying asset value

35. A broker offers commission-free ETF trades. Which statement about owning the ETF remains true?

1. All indirect fund expenses must also be eliminated
2. Every ETF must now have a zero expense ratio
3. Fund management expenses may still reduce returns
4. The investor is guaranteed the index's gross return

36. Under the Series 6 limited registration category, when are sales of registered closed-end company securities within its specified scope?

1. During the period of original distribution only
2. During every later exchange trading session
3. Only after the initial distribution has ended
4. Whenever their price is below their stated NAV

37. Which product is expressly listed on FINRA's Series 6 permitted-activities page?

1. Unit investment trusts
2. Individual corporate common stocks
3. Exchange-traded stock options
4. Individual corporate debentures

38. A trainee reasons that because ETFs appear in the Series 6 study outline, Series 6 automatically grants unrestricted ETF trading authority. What is the correct response?

1. Exam knowledge does not expand the limited registration scope
2. Every security in the outline is automatically authorized for sale
3. Fund structure never matters once the representative passes
4. Passing the exam replaces all product registration restrictions

39. A publicly traded closed-end fund has a $25 NAV and a $22.50 market price. At what discount to NAV does it trade?

1. 11.11%
2. 10%
3. 2.5%
4. 90%

40. Which feature distinguishes a traditional publicly traded closed-end fund from a traditional open-end mutual fund?

1. It is not required to redeem shareholders' shares on demand
2. It must redeem every share at the shareholder's purchase price
3. It cannot invest in portfolios managed by investment advisers
4. It must pay a fixed guaranteed distribution each month

41. A closed-end fund uses borrowed money to increase its portfolio exposure. What is a key implication for shareholders?

1. Leverage eliminates changes in the fund's NAV
2. Borrowing guarantees that distributions are earned income
3. Leverage can magnify gains and losses
4. Borrowing makes the shares federally insured deposits

42. What is the primary aim of an index mutual fund?

1. Track the returns of a specified market index
2. Guarantee a fixed annual return to each shareholder
3. Eliminate all market risk by holding many securities
4. Outperform every active fund during every quarter

43. An index fund owns a sample of its benchmark's securities and its return differs from the benchmark. Which risk does this illustrate?

1. Tracking error
2. A guaranteed redemption premium
3. A fixed annuity death benefit
4. A front-end breakpoint refund

44. Which portfolio is most consistent with the basic investment focus of a money market mutual fund?

1. Long-term concentrated ownership of private real estate
2. A leveraged portfolio of long-dated equity call options
3. Liquid short-term debt, cash and cash equivalents
4. A portfolio limited to small-company common stocks

45. A customer confuses a money market mutual fund with an FDIC-insured bank deposit. Which correction is accurate?

1. The mutual fund is insured if it seeks a stable $1 NAV
2. The mutual fund is insured whenever a bank distributes it
3. The mutual fund is insured if its holdings mature quickly
4. The mutual fund is not FDIC guaranteed and can lose value

46. During which phase of a deferred variable annuity are purchase payments allocated to investment options and assets accumulated?

1. The annuitization phase
2. The accumulation phase
3. The claims settlement phase
4. The policy reinstatement phase

47. What does annuitization generally do to a deferred annuity investment?

1. Converts its value into a refundable brokerage margin loan
2. Converts every investment option into an FDIC-insured deposit
3. Converts its value into a stream of regular income payments
4. Converts the contract into shares of the insurance company

48. A variable annuity owner allocates money to stock and bond subaccounts. Who bears the risk of declines in those selected investments?

1. The owner bears investment risk in the subaccounts
2. The federal government reimburses all investment losses
3. The insurer must replace every loss in the subaccounts
4. The selling broker guarantees the original account value

49. Before selecting a variable annuity's underlying investment options, which documents help assess each option's objectives, risks and expenses?

1. The underlying funds' prospectuses
2. Only the agent's insurance license card
3. Only the insurer's office directory
4. The annuitant's prior bank statements

50. Which ongoing variable annuity charge is commonly called the M&E risk charge?

1. The base contract fee
2. The federal early-distribution tax
3. The mutual fund's brokerage commission
4. The owner's income tax withholding

51. An annuity owner pays an insurer's base contract fee and selects mutual fund subaccounts. Which additional cost should be considered?

1. A mandatory federal sales tax on each subaccount
2. An automatic waiver of all investment expenses
3. The underlying funds' fees and expenses
4. A guaranteed refund of all portfolio trading costs

52. A variable annuity contract imposes a 6% surrender charge on the entire amount withdrawn during the current year. What charge applies to a $15,000 withdrawal under that stated schedule?

1. $600
2. $900
3. $1,500
4. $90

53. A customer chooses an enhanced living benefit rider for a variable annuity. What cost issue should be examined?

1. All base contract fees must be refunded
2. Underlying fund expenses must disappear
3. The rider must be free under federal law
4. An additional rider fee may apply

54. When gains are withdrawn from a nonqualified variable annuity, what federal income tax rate category generally applies to those gains?

1. Ordinary income tax rates
2. Preferential long-term capital gains rates
3. A tax-free municipal interest exclusion
4. The corporate dividends-received deduction

55. A traditional IRA owner buys a variable annuity inside the IRA. What additional tax deferral does the annuity itself provide?

1. A second deduction for the full annuity premium
2. No additional tax deferral beyond the IRA
3. An automatic exclusion of all future IRA income
4. A permanent exemption from distribution requirements

56. A 50-year-old owner takes a taxable early withdrawal from a nonqualified variable annuity and qualifies for no exception. What federal additional tax generally applies to the taxable portion?

1. 5% additional tax
2. 20% additional tax
3. 10% additional tax
4. No additional tax at any age

57. How does ordinary annuitization generally differ from systematic withdrawals without a lifetime-income rider?

1. Systematic withdrawals always guarantee lifetime income
2. Annuitization always preserves unrestricted access to principal
3. Systematic withdrawals automatically convert the account to insurance
4. Annuitization can transfer longevity risk to the insurer

58. What can cause the cash value of a variable life insurance policy to fluctuate?

1. Only changes in the insured's mailing address
2. Performance of the selected investment options
3. Only the date the next premium notice is printed
4. An automatic fixed interest credit identical for all policies

59. A variable life policy's cash value is insufficient to pay fees and expenses, and no lapse protection applies. What risk arises?

1. The policy must continue indefinitely with no further charges
2. The insurer must replace all lost value from its own assets
3. The policy may lapse and the death benefit may be lost
4. The federal government must supply the missing premiums

60. What is a potential effect of borrowing against a variable life insurance policy?

1. The loan may reduce the death benefit and increase lapse risk
2. The loan guarantees that the cash value can never decline
3. The loan eliminates all future interest and policy charges
4. The loan automatically increases the policy's face amount

61. A variable life policy permits flexible premium payments. What does that flexibility generally require the owner to monitor?

1. Whether every policy charge is permanently waived
2. Whether the adviser can select a new insured each year
3. Whether the death benefit must equal the original premium
4. Whether enough value remains to cover policy charges

62. An owner borrows against a variable life policy and later allows it to terminate with the loan outstanding. Which tax issue may arise?

1. The loan is always excluded from income permanently
2. The loan automatically qualifies as a 1035 exchange
3. The loan becomes deductible personal interest by default
4. Federal income tax may become due on the loan

63. A variable life contract states that its death benefit equals the face amount plus cash value. What determines this benefit formula?

1. The terms of the particular insurance policy
2. A rule requiring every variable life policy to use it
3. The broker's choice after the insured has died
4. An annual vote by the underlying fund's shareholders

64. Assuming all other requirements are met, which exchange from an existing life insurance contract is eligible for nonrecognition under Section 1035?

1. Life insurance into an annuity contract
2. Life insurance into a common stock portfolio
3. Life insurance into a bank certificate of deposit
4. Life insurance into an unrestricted brokerage cash account

65. Which proposed exchange does not qualify under Section 1035's permitted contract categories?

1. Life insurance exchanged for another life policy
2. An annuity exchanged for another annuity
3. An annuity contract exchanged for life insurance
4. Life insurance exchanged for an annuity

66. An owner directly exchanges one annuity contract for another and satisfies all Section 1035 conditions. What is the general immediate gain-recognition result?

1. All accumulated gain is taxed immediately at capital gains rates
2. No gain or loss is recognized on the exchange
3. The entire premium becomes a new federal income tax deduction
4. Only half of the accumulated gain is excluded from income

67. An insurer sends a nonqualified annuity owner a surrender check, which the owner endorses to another insurer to buy an annuity. How did IRS Revenue Ruling 2007-24 treat this?

1. As a qualifying exchange solely because the check was endorsed
2. As a tax-free IRA rollover regardless of account registration
3. As a distribution, not a qualifying Section 1035 exchange
4. As a deductible premium payment to the second insurance company

68. For an annuity-for-annuity exchange under 26 CFR 1.1035-1(c), what must be true of the obligee or obligees under the new contract?

1. They must be replaced by unrelated adult beneficiaries
2. They must be the same as under the original contract
3. They must be the insurance companies' registered sales agents
4. They must change whenever the investment options change

69. A proposed annuity exchange qualifies for Section 1035 treatment. Which contractual cost can still arise?

1. Old-contract surrender charges and a new surrender period
2. An automatic waiver of every fee on both contracts
3. A mandatory reimbursement of all past rider charges
4. A permanent ban on charges in the replacement contract

70. Before replacing a variable annuity, why should the representative compare the old death and living benefits with the new ones?

1. A replacement must always increase every existing guarantee
2. All old benefits transfer automatically without cost
3. The replacement may give up valuable existing benefits
4. Federal tax treatment makes contract benefits irrelevant

71. Which statement distinguishes a 529 education savings plan from a prepaid tuition plan?

1. A savings plan always guarantees future tuition at every school
2. A prepaid plan is always a federally insured mutual fund
3. A savings plan offers an investment account for education costs
4. A prepaid plan must allow unlimited tax-free cash withdrawals

72. How are contributions to a 529 plan generally treated for federal income tax deduction purposes?

1. They are fully deductible regardless of the contributor's income
2. They are not deductible on the federal income tax return
3. They qualify for the same deduction as a traditional IRA deposit
4. They are deductible only if the beneficiary attends full-time

73. A 529 distribution is fully matched to the beneficiary's adjusted qualified education expenses. What is the general federal income tax treatment?

1. Only the contributed principal is tax free
2. All distributed earnings are taxed as ordinary income
3. The entire withdrawal is taxed at capital gains rates
4. The distribution is not taxable

74. A 529 withdrawal is used entirely for a nonqualified personal purchase and includes both contributions and earnings. Which portion is generally subject to federal income tax?

1. The entire withdrawal including returned contributions
2. Only the returned original contributions
3. The earnings portion
4. No portion because all 529 withdrawals are tax free

75. For a 529 plan, which enrollment condition generally applies before college room and board can be a qualified expense, subject to the dollar limits?

1. Enrollment in any single course regardless of workload
2. Enrollment at least half-time
3. Enrollment only in a graduate degree program
4. Enrollment exclusively at a public in-state institution

76. Which computer purchase can qualify as a 529 higher education expense?

1. A computer bought solely for the parent's unrelated business
2. A computer used primarily by the beneficiary while enrolled
3. A gaming system used only by an unenrolled sibling
4. A computer bought for the plan adviser's office staff

77. A family claims an education credit and also takes a tax-free 529 distribution in the same year. How must it coordinate the expenses?

1. Use every tuition dollar in full for both tax benefits
2. Do not use the same expenses for both tax benefits
3. Allocate all costs to the credit and ignore the 529 use
4. Treat all 529 earnings as tax free regardless of expenses

78. A parent changes a 529 account's beneficiary from one child to that child's sibling. What is the general federal income tax consequence of that beneficiary change?

1. All earnings become taxable because the beneficiary changed
2. The full balance is automatically treated as a cash gift to the parent
3. The account loses tax status whenever any beneficiary is replaced
4. No income tax consequence because the new beneficiary is family

79. What is the lifetime per-individual limit on 529 distributions treated as qualified student loan repayments?

1. $20,000 per year
2. $35,000 per year
3. No lifetime limit
4. $10,000

80. Which condition is required for the special tax-free 529-to-Roth IRA rollover, in addition to the other limits?

1. A cash withdrawal deposited in any relative's Roth IRA
2. A rollover of every contribution regardless of account age
3. A direct trustee-to-trustee transfer to the beneficiary's Roth IRA
4. An unlimited transfer exempt from all Roth annual limits

81. For 2026, what is the annual federal limit per beneficiary on 529 distributions for qualified K-12 expenses, across all of that beneficiary's 529 accounts?

1. $10,000
2. $35,000
3. No annual limit
4. $20,000

82. A 529 education savings account invests in market-based mutual fund options. Which statement about its value is accurate?

1. Every investment is guaranteed by the sponsoring state
2. The investment can lose value
3. Every investment is automatically insured by the FDIC
4. The account must earn the beneficiary's future tuition increase

83. Beginning January 1, 2026, a qualifying disability generally must have begun before what age for ABLE eligibility?

1. 26
2. 59 1/2
3. 65
4. 46

84. An individual does not receive SSI or Social Security disability benefits. Is ABLE eligibility necessarily ruled out?

1. Yes, current SSI payment receipt is mandatory in every case
2. Yes, only Social Security benefit recipients may own accounts
3. No, because every adult qualifies without a disability requirement
4. No, a qualifying disability certification can provide another path

85. Who is both the owner and designated beneficiary of an ABLE account?

1. The person who contributed the most money
2. The state treasurer administering the plan
3. The broker who recommended the account
4. The eligible individual with the disability

86. How many ABLE accounts may an eligible individual generally own at the same time?

1. One account
2. One account in each state
3. One account for each contributor
4. An unlimited number of accounts

87. Which expense can be a qualified ABLE disability expense when it benefits the designated beneficiary and relates to the disability?

1. An unrelated neighbor's leisure travel
2. The beneficiary's housing expense
3. The contributor's unrelated business expansion
4. A broker's office equipment for general use

88. How are ABLE distributions generally treated for federal income tax when used for qualified disability expenses?

1. They are tax free
2. Only the principal is tax free and earnings are always taxable
3. The entire distribution is taxed as ordinary income
4. They are deductible only as business operating expenses

89. An ABLE balance above $100,000 causes an otherwise eligible SSI recipient to exceed the SSI resource limit. What is the general benefits result?

1. SSI is suspended, while Medicaid can continue if otherwise eligible
2. SSI permanently terminates and Medicaid must always terminate too
3. All ABLE funds become taxable immediately regardless of use
4. The entire ABLE balance is automatically confiscated by the state

90. For SSI purposes, an ABLE beneficiary receives a housing distribution in May and retains it into June. How is the retained distribution generally treated in June?

1. It is always excluded regardless of how long it is retained
2. It becomes a new contribution to the ABLE account automatically
3. It is counted as a resource
4. It is treated as the account manager's personal income

91. Regulation Best Interest protects a retail customer. Which customer fits that definition?

1. A natural person using a recommendation mainly for personal or household purposes
2. A corporation that uses a recommendation to invest its own operating cash reserves
3. A bank that buys fund shares for its own investment portfolio
4. A registered investment adviser placing trades for its advisory clients

92. A representative recommends that a customer roll a 401(k) balance into an IRA at the firm. How does Regulation Best Interest treat this?

1. It is exempt from Reg BI because no specific security has been named yet
2. It is covered only if the customer pays a commission on the rollover
3. It is an account recommendation covered by the best interest obligation
4. It is governed solely by the plan sponsor's fiduciary duty to the participant

93. Under the Regulation Best Interest disclosure obligation, when must the required disclosures be given to the retail customer?

1. Orally, within 30 days after the recommendation is made
2. In writing, before or at the time of the recommendation
3. In writing, with the first quarterly account statement
4. Only when the customer asks for the disclosures in writing

94. Which of the following is NOT one of the four component obligations of Regulation Best Interest?

1. The care obligation
2. The conflict of interest obligation
3. The compliance obligation and its written policies and procedures
4. An ongoing account monitoring obligation

95. Each fund switch a representative recommends looks reasonable alone, but together the switches generate heavy charges. Which part of the Reg BI care obligation addresses this?

1. The firm must disclose its capacity as a broker or dealer in writing beforehand
2. A series of recommended transactions must not be excessive when taken together
3. The firm must identify and eliminate sales quotas tied to specific securities
4. The customer must sign a written acknowledgment for each separate switch

96. A firm runs a one-month contest that awards a trip to the representative who sells the most shares of one fund. What does Regulation Best Interest require?

1. The firm must identify and eliminate the contest
2. The firm may keep the contest if it is disclosed in Form CRS
3. The firm may keep the contest if a principal approves each sale
4. The firm may keep the contest if the fund has no sales load

97. Which item does Regulation Best Interest list as part of a retail customer's investment profile?

1. Political party affiliation
2. Credit card account numbers
3. The customer's employer's net capital
4. Tax status

98. A representative recommends a mutual fund to a small business's corporate account, so Regulation Best Interest does not apply. Which FINRA standard governs the recommendation?

1. No standard, because the customer is not a natural person
2. FINRA Rule 2165 on specified adults
3. FINRA Rule 2111, the suitability rule
4. The Investment Advisers Act fiduciary duty

99. Under FINRA Rule 2111(b), what is required for a firm to be relieved of customer-specific suitability for an institutional account?

1. The account holds at least $5 million in assets and has been open for at least one year
2. The customer signs a waiver releasing the firm from all of its suitability obligations
3. A registered principal approves each recommendation in writing before it is made to the customer
4. Reasonable belief it can evaluate risks independently, plus its affirmative statement of independent judgment

100. A broker-dealer serves a new retail investor. Under Rule 17a-14, by when must the firm deliver its Form CRS?

1. Within 30 days after the brokerage account is opened and fully funded by the investor
2. Before or at the earliest of a recommendation, an order or account opening
3. Only after the investor's first trade has fully settled
4. Together with the first annual privacy notice the firm sends

101. An existing brokerage customer receives a recommendation to roll assets out of a workplace retirement plan. What does Rule 17a-14 require?

1. Nothing more, because the customer already received a Form CRS when the account opened
2. Deliver Form CRS only if a new account number is assigned
3. Deliver the current Form CRS before or at the time of the rollover recommendation
4. Deliver Form CRS within 60 days after the rollover is completed

102. A customer who left her employer at 56 may need withdrawals before 59 1/2. When weighing a rollover, which plan feature should the representative consider?

1. Plan payouts after leaving work after age 55 may avoid the 10% additional tax; IRA payouts generally would not
2. An IRA always permits withdrawals free of the 10% additional tax at any age, so rolling over is always better
3. Employer plans never allow any withdrawals before age 65, so the IRA is the only way to reach the money
4. The 10% additional tax applies only to Roth IRAs, so a traditional IRA rollover removes the issue

103. FINRA Regulatory Notice 13-45 lists the options a participant leaving an employer typically has. Which is NOT one of them?

1. Leave the money in the former employer's plan, if the plan permits it
2. Roll the assets to a new employer's plan, if one is available and rollovers are permitted
3. Transfer the plan balance into a Coverdell education savings account
4. Roll over to an IRA

104. When comparing an employer plan with an IRA for a rollover, what does FINRA Regulatory Notice 13-45 say about protection from creditors?

1. IRA assets always have more creditor protection than plan assets under every state's law
2. Neither employer plans nor IRAs have any protection from creditors in or out of bankruptcy
3. Creditor protection applies only to Roth accounts and never to pre-tax retirement balances
4. Plans have unlimited federal creditor protection; IRA protection outside bankruptcy varies by state

105. A customer takes a $50,000 distribution from a 401(k) paid directly to her and plans to roll it into an IRA. What happens?

1. The plan must withhold 20%, so she must use other funds to roll over the full $50,000
2. No tax is withheld at all, because she intends to roll the money over
3. The plan withholds 10%, and she may roll over only the net amount she received
4. The full $50,000 is taxable no matter what she deposits within 60 days

106. How can a customer move a 401(k) balance to an IRA without any income tax being withheld?

1. Take a check payable to herself and deposit it within 90 days of receiving it from the plan
2. Have the plan administrator pay it directly to the IRA in a direct rollover
3. Request a hardship distribution first
4. Cash out the account and buy the same funds in a brokerage account

107. A customer receives an IRA distribution check and wants to complete a tax-free 60-day rollover. When does the 60-day period start?

1. On the date the distribution is received
2. On the last day of the tax year
3. On the date the customer files a tax return
4. On the date the new IRA is opened

108. A customer owns three IRAs and completed one 60-day IRA-to-IRA rollover in March. What does the IRS one-rollover-per-year rule allow in the next 12 months?

1. One more 60-day rollover from each of the other two IRAs during that year
2. No movement of IRA assets of any kind until the 12 months have fully passed
3. Trustee-to-trustee IRA transfers, but no other 60-day IRA-to-IRA rollover
4. Unlimited 60-day rollovers between IRAs as long as each one is under $10,000

109. What is the 2026 limit on annual contributions to an IRA for a 40-year-old?

1. $7,000
2. $7,500
3. $8,000
4. $6,500

110. A 52-year-old wants to make the maximum 2026 IRA contribution. Including the catch-up, how much can she contribute?

1. $7,500
2. $8,500
3. $9,500
4. $8,600

111. For 2026, what is the elective deferral limit for a 45-year-old employee in a 401(k) or 403(b) plan?

1. $23,500
2. $24,500
3. $32,500
4. $22,000

112. A 40-year-old takes a fully taxable $10,000 distribution from a traditional IRA, and no exception applies. What additional tax applies beyond regular income tax?

1. A 10% additional tax on the amount included in income
2. A 25% excise tax on the full balance of the IRA
3. No additional tax if the money is used for any purpose
4. A 6% tax only on the earnings portion

113. A customer opened and first funded a Roth IRA four years ago and is now 62. Is a distribution of earnings a qualified distribution?

1. Yes, because the customer is over age 59 1/2
2. Yes, because Roth earnings are always tax free
3. No, because qualified distributions require age 70
4. No, because the 5-year period has not been met

114. Which statement about required minimum distributions is accurate for an original Roth IRA owner?

1. Distributions must begin by April 1 of the year after the owner reaches age 73
2. Distributions must begin at age 59 1/2
3. The owner does not have to take distributions during life, regardless of age
4. The owner must withdraw the entire balance at age 75

115. A traditional IRA owner reaches the applicable age of 73 this year. By when must the first required minimum distribution generally be taken?

1. By December 31 of the year the owner turns 70
2. Within 60 days of the owner's 73rd birthday
3. Only when the owner retires from work
4. By April 1 of the following year

116. A customer bought shares of a mutual fund three months ago and receives a capital gain distribution. How is it treated for federal tax purposes?

1. As a short-term gain, because the shares were held for less than one year by the customer
2. As a long-term capital gain, no matter how long the shares were owned
3. As tax-exempt income until the shares are sold
4. As a return of capital that reduces basis

117. A customer bought identical mutual fund shares at different prices over several years. Which basis method may the customer elect when selling some shares?

1. The highest-cost lots, which federal law requires for all mutual fund sales
2. The fund's current NAV as basis
3. Average basis, figured by dividing total cost by total shares
4. Basis equal to the most recent dividend

118. A customer sells fund shares at a loss on November 10 and buys the same fund again on November 25. What is the likely tax result?

1. A wash sale, so the loss cannot be deducted at this time
2. The loss is doubled because the shares were repurchased
3. The loss is fully deductible because the shares were sold first
4. The repurchase is treated as tax-exempt income

119. In 2026, a grandparent gives $19,000 in fund shares to each of three grandchildren. How does the annual gift tax exclusion apply?

1. Only one $19,000 gift is covered for the whole calendar year
2. The exclusion covers $19,000 in total, split among all three donees
3. Each gift is covered, because the exclusion applies per donee
4. None of the gifts are covered, because they are gifts of securities

120. A receiving firm enters a customer's transfer instruction in ACATS. Within what time must the carrying firm validate it or take exception?

1. Three business days
2. Five business days
3. Ten business days
4. One business day

121. After the carrying firm validates a customer account transfer instruction, how long does it have to complete the transfer?

1. Three business days
2. One business day
3. Five business days
4. Thirty calendar days

122. A transferring account holds the carrying firm's proprietary fund, which the receiving firm cannot hold. Which option must the customer be offered under Rule 11870?

1. A forced exchange into a different fund chosen by the receiving firm on the customer's behalf
2. Liquidation, retention by the carrying firm, or transfer directly to the customer
3. An automatic donation of the shares to a charity the customer names
4. Cancellation of the entire account transfer until the fund is sold

123. A representative joins a new firm and a customer asks to move her account with him. The account has no lien or bona fide claim. What does FINRA Rule 2140 say?

1. No member or associated person may interfere with the customer's transfer request
2. The old firm may hold the account until the representative's employment dispute ends
3. The old firm may seek a court order barring the transfer request
4. The customer must wait 90 days before the transfer begins

124. A recently recruited representative phones a former customer about moving assets. Under FINRA Rule 2273, when must the recruiting firm send the educational communication?

1. Within 30 days after the transferred assets arrive at the new firm
2. Only if the former customer later asks for it in writing
3. Within three business days of the call, or with other transfer documents if sooner
4. Before the representative is allowed to make any calls at all

125. Under SEA Rule 17a-3(a)(17), when must a firm furnish a customer with a copy of the account record for an account subject to suitability or best interest review?

1. Only when the customer later decides to close the account and asks for a copy of the record
2. Within 30 days of opening the account and at intervals of no more than 36 months
3. Within 10 business days after each trade in the account
4. Once every 12 months, starting on the account opening date

126. A customer closes her account. How long must the firm preserve the last update of her FINRA Rule 4512 account information?

1. At least two years after the account is closed
2. Until the next FINRA examination
3. Only until the account balance reaches zero
4. At least six years after the account is closed

127. How long must a firm preserve its records of written customer complaints under FINRA Rule 4513?

1. At least one year
2. At least four years
3. At least two years
4. At least ten years

128. A general securities member carries a customer account that holds fund shares. Under FINRA Rule 2231, how often must account statements be sent at a minimum?

1. At least once each calendar quarter
2. At least once a year
3. Only after each transaction
4. At least once every 36 months

129. Under FINRA Rule 2165, which customer is a specified adult?

1. Any customer whose account balance is more than $250,000 at the end of a quarter
2. Any customer of any age who has named a trusted contact person on the account
3. Only a customer who has a court-appointed guardian or conservator in place
4. A 67-year-old, or an adult reasonably believed impaired and unable to protect himself

130. A firm places a temporary hold on a specified adult's disbursement under FINRA Rule 2165. What must it do, and how long can the initial hold last?

1. Notify FINRA within 30 calendar days of the hold; the hold may then last for up to one full year
2. Notify the customer's employer at once; the hold lasts exactly 60 calendar days in all cases
3. Notify authorized parties and the trusted contact within 2 business days; hold ends within 15 business days unless extended
4. Notify nobody until the internal review ends; the hold lasts until the customer files a complaint